More than £70m has now been spent on the trolleybus schemeand its predecessor Supertram in almost 30 years of attempts to create a transport system fit for a 21st Century city.

Ministers have promised the £173m of Government cash earmarked for trolleybus will be spent in Leeds which now looks set to turn to tram-train technology as part of a wider plan for a metro-style transport system.

A Department for Transport spokesman said: “After a full public inquiry, the independent Planning Inspector produced a detailed report which said the Leeds Trolleybus system is not suitable for development. We have carefully considered the findings and accepted the clear recommendation.

“We are disappointed the local authorities cannot proceed with the Trolleybus but £173 million of DfT funding will be retained so the right public transport scheme in Leeds can be developed as quickly as possible.

“We will now fully support Leeds City Council, West Yorkshire Combined Authority on those next steps as the government continues to invest in Yorkshire and helps deliver the Northern Powerhouse.”

In a critical report which followed a 72-day public inquiry, the planning inspector said Leeds City Council and West Yorkshire Combined Authority had failed to show the benefits of trolleybus were worth the damage that would be caused by construction along the route.

But they hit back insisting the city had been forced to pursue trolleybus, also known as NGT, as successive governments had insisted that was the only project they would help to fund following Supertram’s demise.

Leeds City Council leader Judith Blake said: “Leeds has been let down by successive Governments in Whitehall on transport, first Supertram and now with NGT.

“Each occasion setting public transport in the city back many years.”

Work was already underway looking at how to better connect existing public transport in and around Leeds to create a “metro” system and looking at how tram-trains could be used to connect areas without a mainline station to the rail network.

Coun Keith Wakefield, chairman of the West Yorkshire Combined Authority’s transport committee, said trolleybus had been developed “in line with government advice” and the Department for Transport had confirmed the scheme represented good value for money.

He said the authority is “committed to developing a fully integrated metro-style transport system for the City Region with tram-train at its heart and will now work with government to make that a reality.”

The initial trolleybus route would have run between Stourton in the south and Holt Park in North Leeds but further plans had already been developed to extend the network to the Aire Valley.

The announcement the project will not go ahead prompted concern from business leaders worried Leeds is falling behind cities such as Manchester, Birmingham and Nottingham which have developed modern tram schemes.

Chris Hearld, Leeds-based chairman for major accounacy firm KPMG’s north region, said: “Leeds must be one of the most sizable economic hubs without a city transport network and this decision means it will be without one for another decade.”

A 72-day planning inquiry in 2014 which cost more than £2m saw a planning inspector listen to the case for and against the trolleybus project.

The report published today rejected the case for the trolleybus and Mr McLoughlin has decided to accept his findings and refuse to give Leeds the powers to take the project forward.

One of the key findings appeared to be the inspector’s view that modern hybrid buses could achieve bigger benefits for the city than the trolleybus scheme, also known as NGT.

The letter issued to Leeds City Council and the West Yorkshire Combined Authority today, reveals the inspector found:

• “Little evidence to show that the scheme would serve the areas of Leeds that were most deprived, or improve connectivity between the City Centre and areas of highest unemployment”,

• “It would harm the built and natural environment as a result of the introduction of overhead wires and additional street clutter, and the loss of trees and green spaces”

• The council/combined authority “had not fully examined whether there were more suitable corridors for a rapid transit system to meet the scheme’s objectives, nor whether better or more cost-effective ways to improve public transport were now available taking into account”

• “The NGT scheme would result in significant harm to much of the route, particularly where it would be in or near to conservation areas, listed buildings, substantial areas of public open space and vegetation”.

• “The viability of some businesses was likely to be harmed by implementation of the scheme”